Health Care Financing Options
Raising $544 billion over ten years through a “surtax” is an okay way to raise $544 billion. But it’s not my preferred method. Like Steve Benen I think the best way to tax the rich is the way the Obama administration proposed in the first place—limited itemized deductions for rich people and you get $318 billion over ten years. That’s about as progressive in its distributive impact as what the House is proposing, but it’s more economically efficient. Meanwhile, according to Mark Kleiman:
Doubling Federal alcohol taxes would pull in about $90 billion over 10 years, which is 9% of the total budget offset required. It would also directly reduce health care costs, and reduce the homicide rate by something like 6%.
This would hammer my bottom line, but from a policy perspective it’s a very good idea. That still leaves you with $136 billion that you need. Now you can raise most that through a scaled-back version of the surtax idea that would only pinch the really and truly rich. Last, I would like to see some token amount of money raised by some kind of curbing of the tax deductibility of employer-provided health insurance. Put some extremely high cap on it and get $16 billion or something, but then over time inflation and such will cause more and more revenue to come from that source.
25 Responses to “Health Care Financing Options”
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July 16th, 2009 at 5:28 pm
More revenue could be had with a gas tax, a global warming plus as well. But we’re not allowed to think of 2 problems at the same time.
July 16th, 2009 at 5:34 pm
Wow, and I thought the “tax and spend” argument against dems had seen it’s last days. But, I guess to be more accurate we will have to re-title it the “spend and tax dems.” This is going to be fun.
July 16th, 2009 at 5:37 pm
And another suggestion to finance healthcare with a tax on the weak and poor.
July 16th, 2009 at 5:39 pm
Boy, it’s just non stop Sotomayorania! around here.
July 16th, 2009 at 5:43 pm
How about a new picture for health care finance topics?
July 16th, 2009 at 5:43 pm
For the love of God, Matt stop using that photo! There must be some other image, somewhere out there on the internet, that connotes “paying for health coverage.” This is like the tenth time this week that you’ve shown us the stethoscope on the dollar bills. It’s giving me deja vu.
July 16th, 2009 at 6:07 pm
Ah, judd would have us return to the good old days of Republican rule where the rule wasn’t “tax and spend” but rather “spend, spend, spend and let the children pay for it!”
Pop quiz: how much of the current debt is attributable to the spending triumvirate of Reagan/Bush/Bush? Remember to count the cumulative interest on the Ronald Wilson Reagan memorial debt when you do your calculations.
Republican stupidity is boundless.
July 16th, 2009 at 6:14 pm
People netting $350,000 after deductions are “really, truly rich.” Just saying.
July 16th, 2009 at 6:18 pm
Why not a national VAT? Granted it is regressive but there could be exemptions for essentials and rebates for the poor. Aren’t we like the only country that does not have a national VAT?
July 16th, 2009 at 6:19 pm
“That’s about as progressive in its distributive impact as what the House is proposing, but it’s more economically efficient.”
There’s two ways to read this sentence. One is the depressing way in which it means that rich people will just hire more lawyers and accountants to avoid the surtax, so why bother. The other is that Yglesias has fallen prey to the disincentive thesis.
Newsflash – rich people who like making money like making money. They’re workaholics by and large, and they treat salaries as a kind of keeping score. If you raise taxes on them, they will work harder to make even more money.
If the disincentive thesis was true, rich people would have stopped working in the 1940s-1960s. They didn’t.
July 16th, 2009 at 6:21 pm
Hey Matt, what happened to your (justified) hobbyhorse of having additional tax brackets? Granted, that’s roughly what the surtax does but in a weird roundabout way.
July 16th, 2009 at 6:26 pm
If you really want to start WWIII
…suggest paying for the new govt outlays that universal coverage will require by making the folks who will benefit from universal coverage cough up some of the resulting windfall. Insofar as hospitals currently have to eat the losses incurred when the Cobra bites, and they are forced to treat those who can’t pay, this is at least partly offset now by a dizzying array of subsidies from various levels of govt. They won’t need these subsidies once everyone is paying. Insofar as they pass on these losses by charging insurance plans more, and these plans pass these costs on to their customers, there needs to be give-back all up that line once there are no longer any uninsured generating these costs upstream.
Try suggesting this to the industry, but be wearing a raincoat to deal with the splash from exploding heads.
July 16th, 2009 at 6:26 pm
Yeah, Matt – why don’t you have a post about how Senate Judiciary Republicans basically punked out today and admitted that the whole week of hearings was basically a waste of everyone’s time? What are you trying to hide?
July 16th, 2009 at 6:45 pm
And another suggestion to finance healthcare with a tax on the weak and poor.
This is America. Our poor are strong. It’s our rich who are weak, defenseless and naked to their class enemies — they need all the protection they can get — or buy.
July 16th, 2009 at 7:06 pm
but then over time inflation and such will cause more and more revenue to come from that source.
Uhm, what about indexing? Putting in a tax provision without indexing and hoping no one will notice the effects of inflation over time seems kind of dumb in this day and age.
July 16th, 2009 at 7:20 pm
Putting in a tax provision without indexing and hoping no one will notice the effects of inflation over time seems kind of dumb in this day and age.
Or you might be trying to encourage less and less of the activity taxed, in this case gold-plated employer-provided insurance.
It’s the same as an automatic escalator, which proposed Pigoutian levies — I can remember some gas and energy tax proposals — have had from time to time.
July 16th, 2009 at 8:32 pm
It’s the one sin tax I agree with. The effects of alcohol are incredibly expensive to society. The health effects and murders are just the tip of the iceberg. There is also a huge amount of property crime, assaults, imprisonment. There is the waste of the usefulness of workers. The load of taking care of those rendered completely incapable of taking care of themselves. There is no way that the costs to society of obesity, smoking and drugs combined approach the cost of alcohol.
July 16th, 2009 at 10:12 pm
Last, I would like to see some token amount of money raised by some kind of curbing of the tax deductibility of employer-provided health insurance. Put some extremely high cap on it and get $16 billion or something
I’ve been thinking the same thing. Even if it’s largely symbolic, the country at least needs to “get its foot in the door” with respect to reigning in the $300 billion tax code subsidy for the insane practice of tying health insurance to jobs.
Why not a national VAT?
Well, among other reasons because it’s not remotely possible, politically speaking — at least not right now. (Though I think the country is eventually going to adopt one, and we may well see the votes materialize some time in the middle of the next business cycle).
July 17th, 2009 at 3:07 am
If the Bush tax cuts cost us $1.5 trillion over 8 years, wouldn’t repealing them put back $1.5 trillion into the public coffers by 2018?
And if we added 3 percent on top of that -making the marginal rate a reasonable, by historical standards, 41 percent for the richest Americans- we would have $3 trillion to play around with, right?
Doesn’t $3 trillion of extra cash over 8 years cover just about everything, including health care, the deficit, and $1 trillion for a Green Bank (leveraged out to $15 trillion) that provides almost endless stimulus that plays out long beyond our grandkid’s funerals?
The gradual infusion of $15 trillion into the nation’s economy and infrastructure might even allow us to begin to take the first tiny little baby steps necessary to competing with the colossus that has, at this moment in history, left us in the dust. China.
July 17th, 2009 at 7:19 am
I think during the Campaign Clinton proposed curbing the employer exemption but only for rich people with expensive plans. I don’t remember complaints from Unions or anyone else about it.
July 17th, 2009 at 7:42 am
I don’t think Matt has made the case that capping the rate for itemized deductions would in fact be more economically efficient than the surtax plan. As I noted before, because the surtax is directly on AGI and not taxable income, it actually does an end-run around itemized deductions, the lower rates on long-term capital gains and qualified dividends, and so forth. Accordingly, this plan probably does as much or more to broaden the tax base and circumvent tax avoidance as capping the rate on itemized deductions would.
July 17th, 2009 at 9:28 am
The added benefit of setting a cap on the size of tax free health insurance benefits is that it deters companies from offering overly generous health insurance packages which contribute to high prices. Eventually, companies will only offer their employees benefits that are at the tax-free limit, and pay them more cash. This will eliminate the tax revenue from the benefits, but the government will get it from taxing the additional pay.
July 17th, 2009 at 9:35 am
By the way, I agree that in the medium term we should be looking at capping the employer tax deduction (and in the long term, I hope we go to single payer for basic health insurance).
But in the short term, I think it is far more important to get a robust public plan up and running. Once it proves popular–as I think it will–then it will become much, much easier to start phasing out things like the employer tax deduction.
So if it happens in this round of funding, fine, but it certainly isn’t a dealbreaker as far as I am concerned.
July 17th, 2009 at 10:37 am
This is quite myopic. Taxing the rich is a very good way to close the structural budget deficit. This should be paid for by taxing health-related spending, most importantly health benefits. The head of the CBO the other day suggested that taxing benefits is the single most important thing congress can do (other than the public option) to lower healthcare spending. You know what happens when you provide tax subsidies/cuts for certain types of spending? Spending in that area increases.
July 17th, 2009 at 12:02 pm
They should triple the capital gains tax to make sure that investors who buy low during the recession pay for the bailout that’s going to enable their future windfall.